Bloomberg Surveillance: Tariffs, Jobs Report, and Big Tech Earnings

US Trade Policy and Tariffs

• 🇺🇸 Ambassador Jamieson Greer discusses the finalization of tariff deals with dozens of countries, noting that agreements are "pretty much set" after 120 days of negotiation.
• 💡 Rates are largely determined by trade deficits, with countries like Switzerland facing higher tariffs due to a significant trade imbalance and an inability to reach an agreement on reduction.
• 🎯 The US Trade Representative's office will monitor compliance with agreements, with potential consequences including tariffs returning to previous levels if commitments are not met.
• 📈 The administration is shifting from a 70-year policy based on efficiency to one based on fair and balanced trade, aiming to benefit American workers and national security.

July Jobs Report and Economic Outlook

• 📊 The July jobs report showed slowing job gains, with upward pressure on wages and tariffs contributing to a stagflationary shock.
• 📉 Revisions to previous months' data suggest a more significant labor market slowdown than initially reported, leading to increased expectations for a Fed rate cut in September.
• 🏦 Economists debate the Fed's response in a scenario of low growth, high inflation, and a stable unemployment rate, with a leaning towards prioritizing employment.
• ⚠️ Concerns exist about potential margin pressure for companies and a negative impact on corporate earnings and credit quality due to tariffs and economic conditions.

Big Tech Earnings: Apple and Amazon

• 🍎 Apple reported its best quarter in over three years, driven by iPhone demand, though a portion of revenue growth is attributed to a pull-forward effect due to tariff concerns.
• 💡 Apple acknowledges being behind in artificial intelligence and is taking steps, including increased capex and potential M&A, to enhance its AI capabilities.
• ☁️ Amazon's shares fell due to underwhelming cloud growth, but sales and profits exceeded expectations, with the market reaction seen as a reflection of high expectations rather than poor performance.
• 🚀 Amazon's CEO is noted for balancing strong profits and free cash flow with continued investment, fostering investor trust in long-term payoffs, including in AI.

Market Reactions and Future Concerns

• 📈 The bond market is reacting significantly to the jobs report and potential Fed rate cuts, while the equity market, particularly large-cap tech, shows less immediate reaction, dominated by tech-specific earnings stories.
• 💰 High PE multiples in big tech suggest significant expectations for future growth, investment returns, and the impact of tariffs and AI investments.
• 🌐 The overall economic backdrop presents a challenging mix for August, with a cooling labor market, potential inflation heating up, and ongoing geopolitical trade dynamics.